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Business, 13.08.2020 05:01 rayden62

A newly issued bond pays its coupons once a year. Its coupon rate is 5.8%, its maturity is 15 years, and its yield to maturity is 8.8%. a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7.8% by the end of the year (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If you sell the bond after one year when its yield is 7.8%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment (Do not round intermediate calculations. Round your answers to 2 decimal places.)
c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
d. Find the realized compound yield before taxes for a two-year holding period, assuming that:
(i) you sell the bond after two years,
(ii) the bond yield is 7.8% at the end of the second year, and
(iii) the coupon can be reinvested for one year at a 3.8% interest rate.
(Do not round intermediate calculations. Round your answer to 2 decimal places.) Realized compound yield before taxes %

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A newly issued bond pays its coupons once a year. Its coupon rate is 5.8%, its maturity is 15 years,...
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